Alibaba Group BABA reported non-GAAP adjusted earnings of $1.26 per ADS in the first quarter of fiscal 2027, which missed the Zacks Consensus Estimate by 35.05%. In domestic currency, the company reported non-GAAP adjusted earnings of RMB 8.52, which declined 42% year over year.
It posted first-quarter fiscal 2027 revenues of $39.64 billion. The top line beat the Zacks Consensus Estimate by 2.61%. In domestic currency, revenues of RMB 268.95 billion increased 9% year over year.
The revenue growth was driven by accelerated performance in AI Cloud and Compute Services and continued expansion of the China Quick Commerce business, while heavy investments in AI infrastructure, technology and user experience significantly pressured margins.
During the quarter, the company undertook a strategic realignment of its reporting segments, combining Alibaba China E-commerce Group, Alibaba International Digital Commerce Group and Freshippo into a unified Alibaba E-commerce Group, merging Cloud Intelligence Group with T-Head into AI Cloud and Compute Services, and consolidating its AI model labs, Qwen consumer business and QwenWork into a new AI Labs and Applications segment. The company continues to focus on its full-stack AI strategy and consumption businesses.
Alibaba Group Holding Limited Price and Consensus
Alibaba Group Holding Limited price-consensus-chart | Alibaba Group Holding Limited Quote
Revenues by Segments
Alibaba E-commerce Group (76.5% of Total Revenues): Alibaba generated RMB 205.9 billion ($30.3 billion) of revenues from the segment, which increased 4% from the year-ago quarter.
China E-commerce (53.9% of Alibaba E-commerce Group Revenues): The China E-commerce business generated revenues of RMB 110.9 billion ($16.3 billion), down 8% from the year-ago quarter. Customer management revenues declined 7% year over year. Excluding the contra-revenue impact of the company’s new business development program, customer management revenues would have grown 1% year over year on a like-for-like basis. Direct sales, logistics and other revenues fell 10% year over year, reflecting a planned reduction in certain direct sales businesses. The number of 88VIP members, BABA’s highest-spending consumer group, continued to increase by double digits year over year, reaching approximately 64 million, underscoring the platform’s momentum in attracting and retaining a high-spending, loyal consumer base.
China Quick Commerce (25.9% of Alibaba E-commerce Group Revenues): The China Quick Commerce business, comprising Taobao Instant Commerce, Freshippo and other on-demand delivery operations, generated revenues of RMB 53.3 billion ($7.9 billion), up 45% year over year, driven primarily by Freshippo and Taobao Instant Commerce. The business continued to improve unit economics quarter over quarter through higher average order value and enhanced fulfillment logistics efficiency, while maintaining market share and improving order mix through a focus on high-value food and non-food categories.
International E-commerce (13.5% of Alibaba E-commerce Group Revenues): Revenues from the international e-commerce business were RMB 27.8 billion ($4.1 billion), down 1% from the year-ago quarter. AliExpress achieved operating profit during the quarter, driven by logistics optimization and cost-efficiency improvements.
Global Wholesale (6.8% of Alibaba E-commerce Group Revenues): The global wholesale business generated revenues of RMB 13.9 billion ($2 billion), up 7% year over year, primarily due to an increase in revenues from cross-border-related value-added services.
AI Cloud and Compute Services (18.0% of Total Revenues): The segment generated revenues of RMB 48.4 billion ($7.1 billion), up 45% from the year-ago quarter, with revenue growth from external customers also accelerating to 45%, primarily driven by increasing adoption of AI-related products. AI-related product revenues reached RMB 12.4 billion ($1.8 billion), marking the 12th consecutive quarter of triple-digit year-over-year growth. Alibaba Cloud maintained its leading position in China’s AI cloud market. T-Head Semiconductor’s Zhenwu chips, including the newly launched Zhenwu M890 AI processor, have achieved commercial adoption from more than 650 external customers across over 20 industries.
AI Labs and Applications (1.2% of Total Revenues): The segment generated revenues of RMB 3.3 billion ($492 million), up 16% year over year. During the quarter, the company launched its flagship Qwen3.8-Max foundation model and introduced QwenWork, a unified AI-native workforce agent. More than 250 million users have had their first AI-driven shopping experience through the Qwen app’s agentic features since launch.
All Others (10.7% of Total Revenues): The segment’s revenues were RMB 28.8 billion ($4.2 billion), up 1% year over year.
Operating Details
In the fiscal first quarter, sales and marketing expenses were RMB 47.6 billion ($7 billion), down from the year-ago quarter. As a percentage of total revenues, the figure declined to 17.7% from 21.5%, primarily reflecting the impact of the company’s new business development program, under which related subsidies are now recorded as a contra-revenue item, as well as more efficient investment in Taobao Instant Commerce.
General and administrative expenses were RMB 12.7 billion ($1.9 billion), up year over year, largely due to a provision related to a EUR 550 million fine imposed by the European Commission under the Digital Services Act. Product development expenses were RMB 22.5 billion ($3.3 billion), or 8.4% of revenues, reflecting continued investment in technology infrastructure and R&D personnel, particularly around AI.
Adjusted EBITDA was RMB 39.1 billion ($5.8 billion), down 14% year over year due to strategic investments in AI infrastructure and technology, partly offset by improved operating results in the Cloud business and enhanced operating efficiencies. The adjusted EBITDA margin contracted to 15% from 18% in the prior year. Adjusted EBITA fell 30% to RMB 27.3 billion ($4 billion), with the adjusted EBITA margin declining to 10% from 16%.
Balance Sheet & Cash Flow
As of June 30, 2026, cash and other liquid investments were RMB 474.5 billion ($69.9 billion), down from RMB 520.8 billion as of March 31, 2026.
Alibaba generated RMB 22.9 billion ($3.4 billion) in cash from operations, up 11% from RMB 20.7 billion in the prior-year quarter. Free cash flow was an outflow of RMB 44.7 billion ($6.6 billion) compared with an outflow of RMB 18.8 billion in the same quarter a year ago, mainly attributable to increased cloud infrastructure capital expenditure.
Capital expenditures reached RMB 67.7 billion ($10.0 billion) during the quarter, up 75% year over year, reflecting continued investment in AI infrastructure to meet growing customer demand.
The company repurchased approximately $162 million (13.4 million ordinary shares) worth of ordinary shares during the quarter.
Zacks Rank & Stocks to Consider
Alibaba currently carries a Zacks Rank #3 (Hold).
Abercrombie & Fitch ANF, Dollar Tree DLTR and Five Below FIVE are some better-ranked stocks that investors can consider in the broader Zacks Retail-Wholesale sector.
Abercrombie & Fitch, Dollar Tree and Five Below carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Shares of Abercrombie & Fitch have plunged 16.5% in the year-to-date period. Abercrombie & Fitch is slated to report second-quarter fiscal 2026 results on Aug. 26.
Shares of Five Below have surged 28.4% in the year-to-date period. Five Below is set to report second-quarter fiscal 2027 results on Aug. 26.
Shares of Dollar Tree have gained 5.3% in the year-to-date period. Dollar Tree is slated to report second-quarter fiscal 2027 results on Aug. 27.
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This article originally published on Zacks Investment Research (zacks.com).
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